Fri, Feb 19, 16
08:45 ET Update: [Stockboardasset] S&P futures +22bps
08:45 ET Update: [Stockboardasset] Nikkei +277bps
08:45 ET Update: [Stockboardasset]FTSE100 -53bps DAX +118bps
We warned yesterday of the artificialness of the global equity index recent advancement as central bank members generate conversation to manipulate market participants perception of reality. FED Williams was the recent member to speak as he told market, we can’t pull the rug out from the economy right now. Over the course of this week, mutable FED members have acknowledge WTI and USD are generating woes for the US economy. The Global Equity Index is comprised of major markets around the world have halted the 5 day advancement forming an evening star. We believe there will be a retracement of the recent advancement. US Markets have advance near +700bps in a week’s time as forced short covering was produced by OPEC. Coincidently, the SPX tested and rejected 1.272 extensions of the entire bull cycle as support. We learned our markets continue to be highly manipulative as the overseers of the wave function spew nonsense i.e. OPEC. OPEC’s perfect placement of their comments at 26 and range bound of 30 via comments depicts pure manipulation. 4% of the global producers <35 will be below breakeven as the likely hood of WTI rotating the low 30s for an extended period of time is high. We do see improving fundamentals in place for 2H16 in the US Rebalancing, but a dark spot in the refinery sector. Just recently, the market saw the fire sale of WTI from 30-26 as PSX dumped Cushing for immediate delivery. Rumors of an OPEC emergency meeting in the March Timeframe.
Our analyst had a great call yesterday morning on EIA data correcting the draw of the API. Sure enough, EIA confirmed a build. This is the 3rd week the spread of API vs. EIA data has been extremely wide. We are on watch for the US Rig Count today, as we expect more declines. Genscape has EOY’16 rig counts plummeting to mid 250s.
Our Japanese counterparts closed down -142bps as the post NIRP era has led to chaotic moves in the USDJPY and JPN225. China equities closed down on the day, but up on the week.
Global Equities Correlation Coefficient (Daily)
- CL .8782
SPX500 Correlation Coefficient (300min)
Correlation decrease of Asia
- CL .78
- USDJPY -.38
- HKG33 .44
- JPN225 .62
- DX .45
- GC .37
US ECON DATA Release
Option Expiry Week (US)- Day Equity, index, and cash settled currency options
Probability of March Rate Hike has been lowered as FED reconizes global market turmoil, oil, and WTI.
Heavily defended 1.272 extension of the entire current bull cycle 180-182 has held support due in part to the high correlated coefficient WTI. Bracketing on the extensions form 1.618-1.272 is a structured sell zone with a bi modal distribution. As SPY Enters the upper extensions near the 1.618 immense supply hits the market finding buyers in the low 1.272 extension support. This could be due to SWFs meeting funding gaps as WTI hits a multi decade record low. The type of selling and buying at these levels is called a rotation. As price rotates a distribution of the bi modal structure, price tends to migrate to the next distribution once matured. This can be seen as a ping-pong action. Currently, price has rotated the lower distribution of the bimodal and will rotate until the level is mature. The lower distribution POC is 189.50. Tremendous support sits at 188, and if the 188HVN holds, the probability of a migration to the upper distribution will dramatically increase. Play the rotations of the bi modal.
7d x +700bps run in steep slope short cover. Not sustainable. Higher timeframe doesn’t believe recent rally of short covering is sustainable. More rotations of 189.50 point of control of lower bi modal distribution is needed to mature balance.
- Tail Risk outliers today- 194.88 (1.414 extensions) – 186.54 window open
- Downside Risk 189.54, 186.54
- Upside Risk 192.18, 192.86, 193.95 tail risk
- Morning session is downside imbalance from prior session. +700bps advance is an unstable structure with mutable windows open. We expect a downside imbalance to continue today, with the possibility of an open rejection test after the initial balance is created. Nevertheless, artificial markets and unstable structure, we remain bearish on an intermediate timeframe.